Huge savings in cloud computing forecast

Analysis details just how much cost agencies sidestep thanks to cloud computing

By Rutrell Yasin

Apr 07, 2010

Government agencies that have moved to cloud computing have generally achieved between 25 and 50 percent in savings associated with information technology operations, according to a new Brookings Institution report released today called “Saving Money through the Cloud.”

“For the federal government as a whole, this translates into billions in cost savings, depending on the scope of the transition,” writes Darrell West, the author of the report and vice president and director of Governance Studies at Brookings

The data in the report comes from a series of case studies involving government agencies that have moved specific applications from local to remote file servers. Specific analysis involved the cities of Los Angeles; Washington, D.C.; Carlsbad, Calif; and Miami, as well as the State Department, NASA and Air Force.

The Brookings Institution in Washington, D.C. released the report today, as part of an event where Vivek Kundra, the federal chief information officer and a proponent of cloud computing, gave a keynote address.

Cloud computing refers to services, applications and data storage delivered online through powerful file servers. Kundra, who implemented cloud computing while serving as the chief technology officer for D.C., is spearheading efforts to encourage more agencies to move to the cloud to achieve greater operation efficiencies and cost savings.

However, many factors can determined the types of cost savings agencies can obtain by moving to the cloud. They include the nature of the migration, a reliance on public versus private clouds, the need for privacy and security, the number of file servers before and after migration, the extent of labor savings, and file server storage utilization rates, West writes.

Based on this analysis, West recommends five steps to improve efficiency and operations in the public sector:

The government needs to redirect greater resources to cloud computing in order to reap efficiencies.

The General Services Administration should compile data on cloud computing applications, information storage and cost savings in order to determine possible economies of scale generated by cloud computing.

Countries need to harmonize their laws on cloud computing to avoid a “Tower of Babel” and reduce current inconsistencies in regard to privacy, data storage, security processe and personnel training.

Lawmakers need to examine rules relating to privacy and security to make sure agencies have safeguards appropriate to their missions.

West used interviews, media coverage, case materials and documentary research to determine why each agency described in the report wanted to move to the cloud, what their cost structure was before the move (if available), costs after the transition, cost savings in hardware, software, and personnel, and any difficulties experienced during the migration.

“Not every organization we looked at was able to provide complete information in each category, but we report all the available data that we were able to obtain,” he writes.

One of the case studies listed included Los Angeles, which last year decided to move e-mail service for its 30,000 employees from Novell’s GroupWise onto cloud file servers operated by Google.

The $7.5 million contract provided five years of e-mail services for city employees at an average cost of $50 per employee per year. Los Angeles officials had security and reliability concerns, but Google promised to store city data on its secure “Gov Cloud” platforms that are maintained within the continental United States and operated by individuals with high-level security clearances who have passed FBI fingerprint checks.

The company also agreed to provide financial credits to the city if the system was down in excess of service levels agreed to in the e-mail contract. An analysis undertaken by Miguel Santana, the city's administrative officer, found that the five-year costs of running the Google system would be $17.5 million, 23.6 percent less than the $22.9 million for operating GroupWise during that same period.

Another example in the report is the State Department’s Nonproliferation and Disarmament Fund, which needed an application that would make budget information on nonproliferation issues available to program managers working remotely. State decided to use software-as-a-service provider Salesforce.com to provide detailed budget information from any Internet service around the world.

The feature cost $1.4 million, including software, staff time, operations and implementation. Executives estimated that this application cost one-quarter what it would have been had development been undertaken in-house, the Brookings report noted.

Privacy and security remain important areas of emphasis in cloud computing. Government agencies need to develop safeguards appropriate to the mission of each organization, West noted.

“Another factor that is important to long-term cloud cost savings is the lack of uniformity of national laws across borders. Many countries have different rules or norms on cloud computing, privacy, data storage, security processes and personnel training,” West writes.

As a result, “rules on cross-border transactions via the cloud should be clarified and harmonized when possible in order to facilitate innovation,” the report states.